Wednesday, December 28, 2005

New York probes price-fixing in digital music

New York State investigators are investigating whether there is illegal price-fixing in the price of digital music services.

State Attorney General Eliot Spitzer has subpoenaed several major music companies about the wholesale prices they charge for digital files.

A spokesman for his office said the investigation was at a preliminary stage and it could be months before prosecutors decide whether a full investigation is warranted.

Wholesale digital music prices can range from 60 cents to nearly 90 cents US a song, according to industry executives. Operations such as Apple Computer Inc.'s iTunes, the most popular digital music source, then sell songs to users for 99 cents per download.

The New York investigation came to light after Warner Music Group Corp. made a regulatory filing that announced it has received a subpoena from state investigators.

Warner Music said it is co-operating fully and that the investigation is "industry-wide."

Apple chief executive Steve Jobs publicly criticized music companies in September over their pricing policies. As companies renew their contracts with Apple, they are seeking to force wholesale prices higher. Jobs said if Apple has to raise its prices, consumers will do more illegal downloading.

Recording companies also are pressing for variable pricing in digital downloads. They want songs from popular artists such as Green Day to fetch more than those of lesser acts.

Warner Music chief executive Edgar Bronfman Jr. has said Apple has to recognize that not all songs are the same commercially, so they should not be priced the same.

This is not the first time Spitzer, who plans to run for state governor in 2006, has taken on the music industry. Earlier this year his office probed lavish gift-giving by recording companies to radio station employees in an attempt to influence playlists.

In November, Warner Music agreed to pay $5 million US and Sony BMG agreed to pay $10 million US to settle that charge. EMI and Universal are still being investigated.

In 2000, several states and Canada co-operated to investigate allegations price-fixing in the cost of compact discs.